Restaurant recovery: Chef details COVID-19 and labor issues ‘crippling’ the industry
David Nayfeld, Che Fico Group co-owner & Independent Restaurant Coalition board member, joins Yahoo Finance Live to explain the state of the restaurant industry as labor shortages, COVID-19 cases, and inflation stymies efforts to recover business.
Video Transcript
- Well, resurgence of COVID spurred by Omicron is forcing businesses to make some tough decisions on whether to stay open or not during their busiest season. And feeling the impact firsthand, is David Nayfeld, Che Fico Group co-owner and Independent Restaurant Coalition Board member. David, Thanks so much for coming on today. So I had plans. I booked dinner for eight Christmas Day. For eight people. We had family and friends coming in from Los Angeles. They just canceled their trip. They're not coming now. I was able to salvage and cancel my booking without paying a penalty. I'm wondering, what are you seeing firsthand at your restaurant and among the coalition as far as cancellations due to this wave of Omicron?
DAVID NAYFELD: Well, thank you very much for having me. As of right now, we're seeing it trending roughly towards around 30 to 45% per night in cancellations either the day before day of, which is, I mean, incredibly detrimental to restaurants here in San Francisco. We're also experiencing tremendous amount of rain. So outdoor dining has become less of an option for us. So right now, what you're seeing, is us go through this as well as a number of restaurants just having to shut down very, very quickly, because they're getting breakthrough cases with their all vaccinated staff. So then, you essentially have to account for the entirety of the loss of revenue for that night and potentially other nights, as well as loss of product. So we're in a really, really dire situation right now.
- And David, I just want to ask about the labor situation. We-- we asked you about this, and in your notes today, you said that there are actually one million fewer people in the restaurant business. I'm just wondering, is it-- is it still tough to attract talent or to attract any kind of workers in your industry, or are you still seeing a really tight labor market?
DAVID NAYFELD: Yeah, look, I think that the labor market, especially when in reference to the restaurant industry, is a multi-faceted issue, right? You have people who left certain locales that became too expensive for them to live in. You have the fact that people still have a certain amount of tension when dealing with staff or dealing with clientele that could potentially be combative, because they don't like some of these new, kind of, implementations that we need to do that have been put on us by the government.
You have staff that just feel uncomfortable in public still. And then, you add to that, the fact that our industry is a challenging one to work in for anyone. And so-- but I want to be clear, you know, the labor force issue is just one of maybe a dozen of issues that are just really crippling our industry right now. And none of this is going to be solved unless we get federal funding in the form of the Restaurant Revitalization Fund refilled. Which is something that's been promised to us time and time again, and something that has overwhelming bipartisan support.
- And this, as you say, couldn't happen at a worse time. It is the busiest season of the year for the restaurant industry during the holidays. But I'm wondering, you were also surely impacted, as many other sectors were, with supply chain disruptions, the rising costs of food. Every ingredient cost more from chocolate to coffee. Meat prices skyrocketing as well. So how did you-- how have you weathered that over the course of the pandemic? Have you had to raise menu item costs, and have you passed them on to the consumer? And then, if you have, what's been their reaction?
DAVID NAYFELD: Right, so I mean, to answer your question succinctly, we've dealt with it poorly, right, like everyone has had to. There is no-- you know, elegant solution to the fact that we just have to raise our prices across the board. And I'm not talking about by a little. I'm talking about menu prices going up sometimes between, you know, 30% to 50% if you want to hope to survive this, right? And so that is by virtue of the fact that we are going through record inflation for-- for our time, by the fact that, you know, to entice the labor that we need to open our restaurants, we need to overpay them. And-- and I say overpay as in a historic figure, not as in they're being overpaid for their work, because a lot of these people have deserved to get paid more already.
Right? And so we're dealing with a number of different challenges. And I think, at the end of the day, the pricing at restaurants is just only going to go up from here if restaurants hope to survive. You know, the fallout is the fact that many restaurants aren't even-- go through that exercise. Many of them are just going to shut their doors. And we're talking about, you know, we've already lost over 100,000 restaurants in the United States permanently. What we're looking towards, if we don't get the Restaurant Revitalization Fund refilled, and I'm talking about, like, within the coming month, we're already so far behind the ball. A lot of these people are not going to make it past this new year.
- Well, let me continue that discussion then. What's it going to take to get this through? I haven't heard about the Restaurant Revitalization Fund in some time, and we just had the Build Back Better plan kind of drop off the radar now. Is-- in the new year, what is it going to take to derive the impetus for this, and maybe one thing just coming to my head here, is lower menu prices. Because if, in the face of all this economic hardship, all you can do is raise prices 30% to 50% if you do get the funds, are you going to be able to keep prices at more manageable levels?
DAVID NAYFELD: Oh, certainly. If we get funds, that will help a lot of restaurants sustain current pricing models, and take care of their staff, as well as make their landlords whole, pay their creditors, you know, pay everyone involved in the kind of ecosphere of the restaurants, right? So it's a win-win-win for everybody. If you pay restaurants money, they are going to stay open, continue to pay people, pay payroll tax, pay sales tax. You don't get empty storefronts. The entire community benefits when you-- you know, when you keep these businesses alive. To get to your initial question as to where we're at with this, I mean, frankly, we're-- we're very, very close. We have overwhelming bipartisan support.
We really need a couple more Republicans in the Senate to sign on, but we-- we have some Republican support, you know, I just want to kind of point this-- this out to you. We have a bill that's being presented by Senator Wicker and Senator Cardin. We have Senator Schumer support, you know, full-throated support. What we need, is we just need a few more senators to sign on to this. If you have a bill that both Joni Ernst and Elizabeth Warren agree on, right? Like, think about how rare that is, right? The entirety of Congress understands that small business is the backbone of this country. And that restaurants are at the eye of that storm, right?
Like, at the very, very center of one of the most crucial industries to save. And so what we need right now, is, you know, Congress went home for a holiday while we were all dying and closing our restaurants, right? We need for them to take action now. And this is action that they should have taken, to your point, a year ago they should have refilled this. Right now, what we're seeing is the fallout of that with a lot of restaurants that are struggling. With the Omicron virus, kind of, gaining a lot of traction, you're going to see a lot of restaurants that are having to suddenly close, lose a ton of revenue, and they're probably-- they-- a lot of them may not reopen at all.
- It is a very difficult situation for the entire industry. We will have to leave it there. But David Nayfeld, Che Fico Group co-owner and Independent Restaurant Coalition Board member, thank you so much for your time today and we wish you very well.
